Taking traditional loans without collateral is possible with the help of the numerous loan apps available in Nigeria today. However, the same cannot really be said for crypto loans.

Crypto loans are a type of secure loan where holders use their cryptocurrency assets as collateral to obtain liquidity from a lender. At the same time, they pay back in installments at an agreed time. If all goes well, and they repay their loan in full, they can get their crypto assets back from the lender.

For crypto lenders, collateral is used as a security deposit and to calculate lending risk. Without collateral, it may be impossible for lenders to make up for losses incurred in the case that a borrower is unable to repay their loan.

This is not to say that there are no non-collateral loan platforms. Crypto lenders that give out loans without requesting for crypto assets usually make up for possible losses by charging much higher interest rates, giving out lesser loan amounts, and shorter loan durations.

If you have all that is required, taking out crypto loans can be relatively more accessible and faster than traditional ones, as crypto loans do not require credit checks.

Are There Crypto Loans Without Collateral

While a few loan platforms like Goldfinch and Aave may not necessarily require collateral before giving out a crypto loan, there are not many platforms like that. The primary importance of collateral is to prove or assure the lender that you will be able to pay back your loan or choose to forfeit your collateral, which will, in turn, be used to cover any losses that would have been caused by your loan default.

Getting a crypto loan without collateral is quite rare and unlikely; applying for a loan with collateral makes the process faster.

How Does Crypto Loan Work?

Cryptocurrency loans are a special kind of asset. Very much like our traditional assets like landed properties and stock assets, crypto can also be used as collateral for loans. With crypto loans, you can get quick cash, low-interest rates, and no need for credit checks. Taking a crypto loan is an excellent option if you do not want to sell your crypto.

Often, crypto loans are over-collateralized. This means borrowers are to provide crypto with much greater value than they wish to borrow for collateral. This is known as LTV (Loan To Value). Borrowers with a lower (Loan To Value) get lower interest rates. Why do lenders over-collateralize?

Firstly, as we have discussed before, Cryptocurrency is very volatile. Crypto assets are not exempt from this volatility. Hence, lenders make their borrowers over-collateralize to make up for any drop in the value of crypto assets that may occur during the loan duration.

Also, over-collateralization ensures that borrowers want to pay back their loans when due to avoid the forfeiture of their assets.

5 Best Platforms To Loan Crypto

Want to take out a crypto loan? Below are some of the best crypto lending platforms in 2022:

• Binance: Binance is the world’s leading cryptocurrency platform. This makes it a top choice for anyone who wishes to borrow crypto. Any registered user can borrow crypto on this platform. It has fixed interest rates and no maximum or minimum loan amounts. As long as you are able to provide collateral and agree to the given risk ratio, borrowers can borrow any amount they wish. Binance permits users to borrow numerous crypto types with flexible loan terms. Users can choose durations between 7, 14, 30, 90, and 180 days. Looking to get a crypto loan on Binance ? Check here.
• SALT Lending: SALT – Secured Automated Lending Technology is another popular crypto lending platform that provides loans to borrowers who put up blockchain assets as collateral. SALT loans have no extra charges for prepayment, loan origination, or withdrawals. The platform automatically enrolls all users in the StackWise program, which gets them Bitcoin, Ethereum, and USDC on depositing their first monthly payment. On SALT lending, interest rates are fixed, and loan amounts are between $1,000 and $5,000.For more information on the
• CoinLoan: The CoinLoan platform permits you to borrow both cash and crypto. Interest rates are fixed, and borrowers can borrow up to 70% of the collateral they put up. CoinLoan allows users to choose their loan factors like the loan duration and repayment options. The platform also features a handy comparison tool for both lenders and borrowers that can be used to compare rates offered with the ones shown on other lending platforms. Some supported collateral assets include Bitcoin, Ethereum, SOL, and MKR. To use this platform, check here.
• BlockFi: BlockFi is the only independent crypto lender with institutional backing. Borrowing on BlockFi requires an origination fee of 2% of your loan. This platform is most suitable for heavy borrowers as the minimum loan amount is $10,000. Users can borrow as much as 50% of the value of their collateral. Interest rates on BlockFi start from as low as 4.5%. Borrowers can choose to borrow fiat currencies and can also select amongst several token options. The application process is fast, and funding occurs within the same day. You can find more information on BlockFi loans here.
• Nexo: Nexo is another unique crypto loaning platform. It offers a loyalty program that benefits its users in numerous ways. Interest rates paid on borrowed crypto are directly dependent on loyalty levels. This makes borrowing at interests between 0% and 1.9% possible in some instances. Nexo permits users to borrow both traditional cash and crypto tokens. Loan amounts can vary between $50 and $2,000,000. Repayment of loans can be made in cash, crypto, and even a combination of both. Loan approval is usually instant, and funding is within 24 hours.

Essential Factors To Consider When Choosing A Crypto Loan Platform

To ensure secure lending, you must take into consideration some factors before going ahead to pick a crypto loan platform. Some crucial aspects include:

• Interest rates: When selecting a platform, compare interest rates with other similar platforms.
• Loan Duration: Checking if the loan duration for platforms you want to use is fixed or not is also important.
• Deposit limit: Check if there is a minimum deposit required.
• Collateral: Compare how much collateral you would need to stake for a particular amount amongst a handful of platforms.
• Fees: Compare fees required for multiple platforms.
• Platform history: Borrowers must review the track records of platforms they wish to loan from. Reviews and comments from other users can play a significant role in helping you decide.

Also, read USSD codes for all loan apps in Nigeria.